Final Results

Mavinwood PLC 14 March 2007 Mavinwood plc Preliminary results for the 12 months ended 31 December 2006 Financial highlights: 2006 2005 £'000 £'000 Turnover 42,453 15,264 Profit before taxation 1,589 528 Underlying adjusted profit before tax * 4,958 1,495 Basic earnings per share 0.10p 0.05p Adjusted fully diluted earnings per share* 0.80p 0.53p +51% Acquisitions completed during the year: Wansdyke for £11m on 10 February Independent Inspections for an initial consideration of a net £10m on 18 July Mono for an initial consideration of £6m on 7 September *before goodwill amortisation, share based payments charge and notional interest on contingent consideration Kevin Mahoney, Chief Executive of Mavinwood said: 'These are very good results as we continue to build strong positions in both our targeted markets, emergency repair and document handling. The three acquisitions we made during the year are performing well and as with all our acquisitions are benefiting from continuity of senior management. We anticipate further benefits as we continue to integrate the businesses. Our net debt is £17.6m which gives us significant scope to make further acquisitions in cash. When we floated on AIM in 2004 our strategy was to build a market leading UK support services business in our chosen sectors. These results confirm that we are delivering on this strategy' Mavinwood plc Kevin Mahoney 020 7661 9650 Mike Vincent 020 7661 9651 Threadneedle Communications John Coles 020 7936 9604 BACKGROUND Mavinwood was launched on AIM on 5 November 2004 and is pursuing a buy and build strategy in the support services sector. The strategy is to acquire and develop support services businesses which have the potential for growth, either organically or in combination with other complementary businesses. The focus is on the emergency repair (especially where there is an insured repair) and document handling sectors. CHIEF EXECUTIVES REVIEW RESULTS Turnover in 2006 was £42,453,000 (2005:£15,264,000) and the profit before tax was £1,589,000 (2005: £528,000). The profit before goodwill amortisation, share based payments charge and notional interest on contingent consideration was £4,958,000, (see Profit before taxation section below) (2005: £1,495,000). The basic earnings per ordinary share were 0.10p, (2005: 0.05p). However, the measure we focus on as a Board is the fully diluted earnings per share before goodwill amortisation, share based payments charge and notional interest on contingent consideration. At this level, the earnings per share for 2006 were 0.80p compared to 0.53p in 2005. This is an impressive growth of some 51%. At 31 December 2006, net debt of the Group amounted to £17,649,000 (2005: £4,335,000). The Mavinwood Group comprises two divisions, Emergency Repair and Document Handling. EMERGENCY REPAIR 2006 2005 £'000 £'000 Sales ANSA * 25,884 12,973 Independent Inspections/Mono ** 8,631 - -------- -------- Total 34,515 12,973 ======== ======== EBITA*** ANSA * 3,843 1,589 Independent Inspections/Mono ** 944 - -------- -------- Total 4,787 1,589 ======== ======== * ANSA 6 months in 2005 ** Independent Inspections 5 1/2 months and Mono 4 months in 2006 *** Excluding share based payments charges The significant increase in sales and profit in this division is principally due to the fact that ANSA was only included for six months in 2005 compared to a full twelve months in 2006 and that the 2006 figures include Independent Inspections for five and a half months and Mono for four months. This division includes three businesses which serve principally the insured repair sector. Approximately 90% of sales in 2006 were to the leading insurance companies and we also service a range of housing associations and commercial companies. All three businesses share a common business process which is: •Take the emergency call from the customer via the insurer •Arrange a survey to validate or repudiate the claim and cost out the repair •Undertake the repair either by directly employed labour or sub contractors ANSA specialises in drainage surveys and repair; Independent Inspections in flooring surveys and restoration and Mono in building fabric surveys and repairs, often due to water damage. ANSA and Independent Inspections are national businesses and Mono is currently a regional business in the North West. There is some customer overlap between the businesses but one of our opportunities moving forward is to offer all our services to a wider range of customers. All these businesses operate to high service standards. Examples of key performance indicators that are monitored on a continuous basis are: •Response times in terms of contacting a policyholder after they report an insured event •Courtesy of staff and customer satisfaction •Average cost per claim There are integration benefits to flow between the businesses which have begun in late 2006. A range of integration projects are underway including: •Assessing and optimising IT platforms •Purchasing initiatives •Extending Mono's reach across the country •Optimising back office functions •Reviewing marketing opportunities and widening the service offering As well as good organic growth within the division, we will continue to look for bolt on acquisitions which would further enhance our offering. Turning to the highlights within each operation: ANSA ANSA's volume of instructions grew satisfactorily comparing 2006 with calendar 2005. The business tends to produce higher volumes in the second half of the year. From October we were also awarded 100% of volumes from one leading insurer instead of 50% and this arrangement will run for three years. Operating profit at ANSA has increased due to volume growth, cost reductions and productivity gains. Customers have benefited from strong performance in claims validation, service delivery and cost control. ANSA has extended its drainage services to a wider range of customers in the commercial sector. This initiative has had minimal impact in 2006 but good volumes of new work are coming through in 2007 to supplement business flowing from the renewal of a contract with a major high street retailer for 3 years. ANSA also owns a small business offering Health and Safety training. Revenues from ANSA Training dipped in 2006 as a number of trainers left the business. INDEPENDENT INSPECTIONS Independent Inspections' initial contribution was hampered by delays in bringing on new business from insurers and a weak volume of instructions in the last few weeks of the year. Whereas volumes through the year were running above 2005 levels, in December volumes dropped below those of December 2005. This was an industry wide issue and not peculiar to Independent Inspections. A series of profit improvement opportunities are being implemented in Independent Inspections in the second quarter. MONO Mono has progressed strongly under our ownership. Volumes are well up over the comparable four months in 2005 and the business is looking to widen the postcodes it covers outwards from the Manchester, Liverpool and Leeds area. The number of full time employees has increased from 337 at 7 September to 373 at 31 December 2006 and has increased further since the year end. DOCUMENT HANDLING 2006 2005 £'000 £'000 Sales Restore * 4,162 2,291 Wansdyke ** 3,776 - -------- -------- Total 7,938 2,291 ======== ======== EBITA*** Restore * 1,160 614 Wansdyke ** 1,258 - -------- -------- Total 2,418 614 ======== ======== * Restore 7 months in 2005 ** Wansdyke 11 months in 2006 *** Excluding share based payments charges The document handling division serves a wide range of customers, including law firms, corporates of varying sizes, financial services companies, councils and health trusts. Our customers are mostly based in London and the South across to Bristol and South Wales. The majority of sales are the storage and retrieval of archive boxes but also individual files and other material such as magnetic media and film. Scanning of documents on a selective basis is also offered to clients. Shredding of documents at the end of their useful lives is currently outsourced, although this would form a logical product extension. The key non-financial performance indicators are: •% accuracy in retrieving items •% of items retrieved in accordance with terms of service, such as same day or next day delivery We are well advanced with our integration plans for Restore and Wansdyke. Approximately £96,000 of integration costs have been charged against Wansdyke's profits in 2006. The Restore operating system of bar coding is being applied at Wansdyke and the back office functions are increasingly being integrated. Total employees at Wansdyke have dropped from 75 at February 2006 to 63 at 31 December 2006 by natural wastage as systems have become more automated. We operate a combination of freehold and leasehold sites at Wansdyke and Restore respectively. Due to the absence of rental charges, the return on sales at Wansdyke is higher than that at Restore. The market for the physical storage of archives continues to grow well in excess of GDP, with especially strong growth in sectors such as professional services. Overall volume growth in Restore and Wansdyke compared to the comparable period in 2005 was 7%. We still have significant amounts of undeveloped space at our underground storage facilities near Bath which we will be looking to fit out over the next couple of years CENTRAL COSTS Central costs have increased from £495,000 to £969,000. The Group has been fully operational throughout 2006 whereas in 2005 the Company was a cash shell for the first five months of that year. INTEREST Net interest payable amounted to £1,436,000 as we borrowed to fund the acquisitions of Wansdyke and Mono. Included within the net interest charge is £158,000 representing the notional interest on contingent consideration due on the acquisitions of Independent Inspections and Mono. The discount rate applied in this calculation was 7.9% PROFIT BEFORE TAXATION The profit before tax for the year ended 31 December 2006 was £1,589,000 (2005: £528,000). However, the Directors believe that an adjusted measure of profit before tax and earnings per share provides shareholders with a more appropriate representation of the underlying earnings derived from the Group's business. The items adjusted for in arriving at that underlying level are as follows: 2006 2005 £'000 £'000 Profit before tax 1,589 528 Amortisation of goodwill 2,172 860 Share based payments charge 1,039 107 Notional interest on contingent consideration 158 - ---------- ---------- Adjusted profit before tax 4,958 1,495 ========== ========== Neither the amortisation of goodwill nor the notional interest on the contingent consideration attracts any tax relief. The share based payments charge only attracts a potential benefit through deferred tax. TAXATION Due to the distortions caused by the non-deductibility of goodwill and the notional interest on the contingent consideration, the reported tax charge is 75.2% (2005:80.9%). However, the underlying tax rate during 2006 was 30.4%, as a percentage of adjusted profit before taxation. (2005: 30.2%). EARNINGS PER SHARE (EPS) Basic EPS is 0.10p, which compares with 0.05p in 2005. Basic EPS adjusted as above was 0.89p (2005: 0.56p). Assuming the exercise of all options and awards under the LTIP plus the conversion of the convertible A shares at an average price in 2006 of 13.93p (2005: 10.05p), the fully diluted adjusted EPS becomes 0.80p (2005:0.53p) an increase of 51%. SHARE ISSUES New equity was issued on three occasions in 2006. • 9.8m shares were allotted on 31 May at 11.0p to the vendors of Restore in settlement of contingent consideration due. This amount of £1,075,000 represented half the contingent consideration with the remainder settled in cash. • 100m new shares were placed on 17 July with existing and new shareholders at 12.0p per share. The proceeds of £12m were used to fund the cash element of the acquisition of Independent Inspections of £9m. The remainder or over-raise of approximately £1.8m after costs was used to reduce debt in the short term. A further 7.8m shares were allotted to the vendor of Independent Inspections with a value of £1m. • 2m shares were allotted at 15p per share on 7 September as part consideration for the acquisition of Mono. ACQUISITIONS Details of all the Group's acquisitions are set out in note 5 to this announcement. The total initial investment in these acquisitions was £30.4 million with estimated contingent consideration payable in cash of £5.0 million, subject to meeting profit improvement objectives. The maximum amount of contingent consideration payable is £5 million. During the year the Company paid £2,150,000 in contingent consideration relating to the 2005 acquisition of Restore. Approximately £0.5 million may be paid as contingent consideration in 2007. The Group will continue to pursue acquisition targets that support its product and service development. BALANCE SHEET Net assets increased to £42,075,000 in the year reflecting the share issues to part fund the acquisitions plus the profit in the year of £394,000. Goodwill on the five acquisitions, at 31 December 2006 was £52,418,000 (2005: £31,224,000). Tangible fixed assets totalled £11,084,000 (2005: £1,996,000) principally comprising the freehold underground storage facilities at Wansdyke, but also computer systems, storage racking and vehicles. Operating working capital (excluding cash) amounted to a net £2,566,000 at 31 December 2006. Net debt at the year end totalled £17,649,000 after deferred financing costs of £310,000. In order to part fund our acquisitions, we operate a number of facilities led by Allied Irish Banks, plc (AIB) which currently run through to September 2011. At 31 December 2006, the Group had unutilised committed bank facilities totalling £3,300,000 in addition to cash of £ 1,850,000. CASH FLOW The net cash inflow from operating activities after capital expenditure was £3,564,000, (2005: £1,027,000). This inflow is after taking account of an outflow of £2,369,000 in the year on working capital. This outflow is partially due to an outflow of VAT at Independent Inspections and Mono totalling £937,000. The VAT related to the sales of their respective office buildings just prior to acquisition. Gross capital expenditure totalled £1,168,000, (2005: £182,000). Significant expenditures comprised the fitting out of empty space in the underground storage areas at Wansdyke and installing new racking at both Restore and Wansdyke. At ANSA, we acquired the trade and assets of a small sub-contractor The Drain Technicians, for £143,000. In November 2006 we sold and leased back the vehicle fleet at Independent Inspections. This transaction realised £0.7 million in cash and will also result in operating savings on the fleet going forward, CHANGES IN UK ACCOUNTING STANDARDS With effect from 1 January 2006, the Group adopted FRS 20, Share Based Payments. FRS 20 seeks to reflect the cost of share based remuneration, including share option schemes, in the profit and loss account. The effect of FRS 20 has been reflected both in 2006 and in a restatement of 2005. OUTLOOK The Group ended the year with two well established divisions and a current market capitalisation in excess of £80 million. Integration benefits are coming through in the two divisions as well as good underlying organic growth. The emergency repair and document handling industries continue to grow strongly in 2007 and all our businesses are trading in line with expectations. We still plan to add further complementary businesses to these operations on a selective basis and given the cash generative qualities of the business, there is significant scope to acquire further businesses for cash. Kevin Mahoney Chief Executive Officer 14 March 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Continuing Acquisitions Year ended 31 Year ended 31 Operations December December Notes 2006 2005 £'000 £'000 £'000 £'000 as restated TURNOVER 2 30,046 12,407 42,453 15,264 Cost of sales (19,788) (6,412) (26,200) (10,640) -------- --------- --------- --------- Gross profit 10,258 5,995 16,253 4,624 Administrative expenses (8,826) (4,402) (13,228) (3,883) ---------------- ------ -------- --------- --------- --------- EBITA and share based payments charge 4,034 2,202 6,236 1,708 Goodwill amortisation (1,590) (582) (2,172) (860) Share based payments charge (1,012) (27) (1,039) (107) ---------------- ------ -------- --------- --------- --------- OPERATING PROFIT 1,432 1,593 3,025 741 -------- --------- Interest payable (1,518) (268) Interest receivable 82 55 --------- --------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,589 528 Taxation 3 (1,195) (427) --------- --------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 394 101 ========= ========= Earnings per share (pence per share) Basic 4 0.10 p 0.05 p Fully diluted 4 0.09 p 0.05 p ========= ========= STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2006 2006 2005 £'000 £'000 as restated Profit for the financial year 394 101 ========= Prior year adjustments Share based payments charge (86) --------- Total recognised gains and losses since last financial statements 308 ========= 2004 and 2005 results have been restated for the adoption of FRS 20 'Share based payments' during 2006. CONSOLIDATED BALANCE SHEET As at 31 December 2006 Notes 2006 2005 £'000 £'000 as restated FIXED ASSETS Intangible assets 5 52,418 31,224 Tangible assets 11,084 1,996 -------- -------- 63,502 33,220 -------- -------- CURRENT ASSETS Stocks and work in progress 311 250 Debtors 13,369 5,509 Cash at bank 1,850 837 -------- -------- 15,530 6,596 CREDITORS: Amounts falling due within one year (16,792) (6,593) -------- -------- NET CURRENT (LIABILITIES)/ASSETS (1,262) 3 -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 62,240 33,223 -------- -------- CREDITORS - amounts falling due after more than one (15,790) (3,564) year PROVISIONS FOR LIABILITIES AND CHARGES (4,375) (2,716) -------- -------- NET ASSETS 42,075 26,943 ======== ======== CAPITAL AND RESERVES Called up share capital 8 503 383 Share premium account 40,060 26,459 Share based payments reserve 1,102 85 Profit and loss account 410 16 -------- -------- EQUITY SHAREHOLDERS' FUNDS 9 42,075 26,943 ======== ======== CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2006 Continuing Year ended Year ended Operations Acquisitions 31 December 31 December Notes 2006 2006 2006 2005 £'000 £'000 £'000 £'000 NET CASH INFLOW FROM OPERATING ACTIVITIES a 4,448 284 4,732 1,209 -------- --------- --------- --------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Net interest paid (948) 20 (928) (133) Interest element of finance lease (19) (8) (27) (13) payments -------- --------- --------- --------- 3,481 296 3,777 1,063 -------- --------- --------- --------- TAX PAID (494) (490) (984) (213) -------- --------- --------- --------- CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets (627) (541) (1,168) (182) Sale of tangible fixed assets 66 776 842 - -------- --------- --------- --------- (561) 235 (326) (182) -------- --------- --------- --------- ACQUISITIONS Purchase of subsidiaries and costs 5 (29,114) - (29,114) (22,079) Payment of contingent consideration (1,075) - (1,075) - Cash acquired with subsidiaries - 4,682 4,682 1,150 -------- --------- --------- --------- NET CASH OUTFLOWS BEFORE FINANCING (27,763) 4,723 (23,040) (20,261) -------- --------- --------- --------- FINANCING Principal repayment due under finance (118) (569) (687) (203) leases Net proceeds from issue of shares 11,346 - 11,346 22,982 Bank loan advances 18,043 - 18,043 5,140 Deferred financing costs - (268) (268) (202) Bank loan repayments (3,500) - (3,500) (1,000) Repayment of indebtedness acquired - (881) (881) (7,588) -------- --------- --------- --------- 25,771 (1,718) 24,053 19,129 -------- --------- --------- --------- INCREASE/ (DECREASE) (1,992) 3,005 1,013 (1,132) IN CASH ======== ========= ========= ========= a CASH FLOWS Continuing Acquisitions Year to 31 Year to 31 Operations December December 2006 2006 2006 2005 £'000 £'000 £'000 £'000 As restated Reconciliation of operating profit to net cash inflow from operating activities Operating profit 1,432 1,593 3,025 741 Depreciation 575 344 919 305 (Gain)/loss on disposal of tangible assets 39 (93) (54) - Amortisation of goodwill 1,590 582 2,172 860 Share based payments 1,012 27 1,039 107 -------- --------- -------- -------- 4,648 2,453 7,101 2,013 Decrease/(incr ease) in stocks and work in progress 102 (43) 59 195 (Increase) in debtors (944) (1,626) (2,570) (64) (Decrease)/inc rease in creditors 642 (500) 142 (935) -------- --------- -------- -------- Net cash inflow from operating activities 4,448 284 4,732 1,209 ======== ========= ======== ======== NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 BASIS OF ACCOUNTING The consolidated financial information for the year ended 31 December 2006 has been prepared on a basis consistent with the previous year and in accordance with applicable UK accounting standards. The preliminary announcement does not constitute the Group's statutory financial statements within the meaning of s240 of the Companies Act 1985. The preliminary announcement contains information extracted from the audited financial statements of the Group for the year ended 31 December 2006 and the year ended 31 December 2005. The statutory accounts for the year ended 31 December 2006 will be sent to shareholders shortly. The auditors have reported on these financial statements. Their report was unqualified and did not contain a statement under s.237 (2) or (3) of the Companies Act 1985. The Group's 2005 accounts, which contain an unqualified audit report, have been filed with the Registrar of Companies. 2 SEGMENTAL ANALYSIS Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 as restated The turnover for the year was derived from the Group's principal activities as follows: Emergency Repair 34,515 12,973 Document Handling 7,938 2,291 ----------- ----------- TURNOVER 42,453 15,264 =========== =========== The Group's profit before tax is derived from its principal activities as follows: Emergency Repair 4,787 1,589 Document Handling 2,418 614 Central costs (969) (495) ----------- ----------- EBITA and share based payments charge 6,236 1,708 Goodwill amortisation (2,172) (860) Share based payments charge (1,039) (107) Notional interest on contingent consideration (158) - Other interest payable (1,360) (268) Interest receivable 82 55 ----------- ----------- PROFIT BEFORE TAX 1,589 528 =========== =========== The Group's net assets are employed in its principal activities as follows: Emergency Repair 44,303 24,964 Document Handling 19,988 8,815 Central (184) 99 Contingent consideration (4,383) (2,600) ----------- ----------- 59,724 31,278 Net debt (17,649) (4,335) ----------- ----------- NET ASSETS 42,075 26,943 =========== =========== All trading of the Group is undertaken within the United Kingdom and the Company has no foreign operations. 3 TAXATION Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Current tax: UK corporation tax on profits for the year 1,571 476 Adjustments in respect of previous periods (11) - ---------- ---------- Total current tax 1,560 476 ---------- ---------- Deferred tax: Deferred tax (365) (49) ---------- ---------- Total deferred tax (365) (49) ---------- ---------- Total tax charge 1,195 427 ========== ========== Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Factors affecting tax charge for year Profit on ordinary activities before tax 1,589 528 ---------- ---------- Profit on ordinary activities multiplied by the rate of corporation tax of 30% 477 158 Effects of: Goodwill on consolidation 652 258 Expenses not deductible for tax purposes 43 25 Notional interest on contingent consideration 47 - Timing differences - Share based payments charge 312 25 Capital allowances in excess of depreciation 63 (3) Chargeable gains 12 - Net utilisation of losses - (3) Benefit of small companies rate 3 (15) Adjustments in respect of previous years (11) - Other timing differences (38) 31 ---------- ---------- Current tax charge for year 1,560 476 ========== ========== After deducting deferred tax of £365,000 and adding back taxation of £312,000 on the share based payments charge of £1,039,000 the tax charge on the adjusted profit before tax of £4,958,000 becomes £1,507,000 or 30.4% 4 EARNINGS PER ORDINARY SHARE Basic earnings per share have been calculated on the profit after taxation for the year and the weighted average number of ordinary shares in issue during the year. Adjusted earnings per share which are before goodwill amortisation, share based payments charge and notional interest on contingent consideration have been presented in addition to the basic earnings per share since, in the opinion of the directors, this provides shareholders with a more appropriate representation of the underlying earnings derived from the Group's businesses. Year ended Year ended 31 December 31 December 2006 2005 No. of shares No. of shares Weighted average number of shares in issue 388,920,578 184,579,044 ========== ========== £'000 £'000 Profit after taxation on ordinary activities 394 101 === === Adjustments Amortisation of goodwill 2,172 860 Share based payments charge (net of tax) 727 82 Notional interest on contingent consideration 158 - ---------- ---------- Adjusted earnings 3,451 1,043 ========== ========== Basic earnings per ordinary share 0.10p 0.05p ========== ========== Adjusted basic earnings per ordinary share (before goodwill amortisation, share based payments charge and notional interest on contingent consideration) 0.89 p 0.56 p ========== ========== No. of shares No. of shares Weighted average number of shares in issue 388,920,578 184,579,044 Convertible 'A' Shares, Share Options and awards under the LTIP 44,082,349 11,087,871 ---------- ---------- Weighted average fully diluted number of shares in issue 433,002,927 195,666,915 ========== ========== Fully diluted earnings per ordinary share 0.09 p 0.05p ========== ========== Adjusted fully diluted earnings per ordinary share (before goodwill amortisation, share based payments charge and notional interest on contingent consideration) 0.80 p 0.53 p ========== ========== The diluted earnings per share are the basic earnings per share adjusted for the dilutive effect of the conversion into fully paid shares of the outstanding share options and awards under the LTIP. They are also adjusted for the conversion of the A shares into ordinary shares at a price of 13.93p, being the average price per ordinary share in the year ended 31 December 2006 (2005: 10.05p). 5 INTANGIBLE ASSETS Goodwill £'000 Cost 1 January 2006 32,084 Contingent consideration adjustment - Restore (450) Adjustment - Restore 20 Adjustment - ANSA 90 Addition - Wansdyke 3,656 Addition - Independent 13,665 Addition - Drain Technicians 121 Addition - Mono 6,264 ---------- 31 December 2006 55,450 ---------- Amortisation 1 January 2006 (860) Amortisation charge for the year (2,172) ---------- 31 December 2006 (3,032) ---------- Net book value at 31 December 2006 52,418 ========== Net book value at 31 December 2005 31,224 ========== The directors consider each acquisition separately for the purpose of determining the amortisation period of any goodwill that arises. The goodwill arising from the three acquisitions in 2006 is being amortised over 20 years. The amount of contingent consideration expected to be payable in respect of the acquisition of Restore was reduced by £0.5 million between 31 December 2005 and May 2006 due to profit levels attained. Certain leasehold improvements at ANSA were revalued downwards by £0.1 million during 2006. WANSDYKE On 10 February, Mavinwood acquired Wansdyke Security Limited, a document handling business for £11m in cash. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 3,217 5,412 8,629 Working capital (514) - (514) Taxation (634) - (634) Cash 1,250 - 1,250 Loans (881) - (881) Finance leases (86) - (86) --------- --------- --------- Net assets acquired 2,352 5,412 7,764 --------- --------- Goodwill capitalised 3,656 --------- Consideration 11,420 ========= Satisfied by: Cash to vendors 10,968 Related costs of acquisition 452 --------- 11,420 ========= 5 INTANGIBLE ASSETS cont... The only fair value adjustment is to net assets in relation to the freehold and long leasehold storage facilities at Wansdyke which were valued upon acquisition by an external firm of Chartered Surveyors. INDEPENDENT INSPECTIONS On 18 July, Mavinwood acquired Independent Inspections Holdings Limited for an initial consideration of £11.9m. Net funds of £2.9m were left in the balance sheet on completion. The consideration was satisfied by £10.9m in cash and £1m in shares. The cash element was funded by a Placing of £12m at 12p per share. The ''over raise'' in the Placing after costs was approximately £1.8m which was used to reduce debt in the short term. The vendor, who is staying with the business, can earn contingent consideration of up to £4m linked to the future performance of the business. £2m would be payable in March 2008 assuming EBITA of £1.7m is delivered in 2007 and a further £2m would be payable in cash in March 2009 on the basis that EBITA of £2m is delivered in 2008. The maximum total consideration is £15.9m. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 814 - 814 Working capital (1,310) - (1,310) Taxation (177) - (177) Cash 3,412 - 3,412 Finance leases (520) - (520) --------- --------- --------- Net assets acquired 2,219 - 2,219 --------- --------- Goodwill capitalised 13,665 --------- Consideration 15,884 ========= Satisfied by: Cash to vendor 10,924 Related costs of acquisition 607 Discounted contingent consideration (gross £4 million) 3,353 Issue of Mavinwood shares to vendor 1,000 --------- 15,884 ========= 5 INTANGIBLE ASSETS cont... MONO On 7 September, Mavinwood completed the acquisition of Mono Services Limited for an initial consideration of £6m, utilising some of the debt capacity generated by the Placing. Costs of the acquisition were £0.3m. The £6m of initial consideration comprises cash of £5.7m and £0.3m in ordinary shares, priced at 15p. Contingent consideration of up to another £1m could also be payable, in two amounts, over the next two years. This payment is linked to the levels of EBITA attained by Mono in each of the two years ending 31 August 2007 and 2008. Book value at Fair value Fair value at acquisition adjustment acquisition £'000 £'000 £'000 Fixed assets 184 - 184 Working capital 1,121 - 1,121 Taxation (360) - (360) Cash 20 - 20 Finance leases (15) - (15) --------- --------- --------- Net assets acquired 950 - 950 --------- --------- Goodwill capitalised 6,264 --------- Consideration 7,214 ========= Satisfied by: Cash to vendors 5,700 Related costs of acquisition 342 Discounted contingent consideration (gross £1 million) 872 Issue of Mavinwood shares to vendors 300 --------- 7,214 ========= On 31 August 2006, ANSA Utilities Limited acquired the trade and assets of The Drain Technicians (UK) Limited. The cash consideration, including £22,000 for the fixed assets, was £132,000. The total consideration paid for group acquisitions during the year was £34.6 million, which was satisfied as follows: Wansdyke Independent Drain Mono Total Inspections Technicians £'000 £'000 £'000 £'000 £'000 Cash to vendors 10,968 10,924 110 5,700 27,702 Related costs of acquisition 452 607 11 342 1,412 Discounted contingent consideration not yet due (gross £5 million) - 3,353 - 872 4,225 Issue of shares to vendors - 1,000 - 300 1,300 -------- -------- -------- -------- ------- 11,420 15,884 121 7,214 34,639 ======== ======== ======== ======== ======= 6 ANALYSIS OF CHANGE IN NET DEBT At 1 January Cashflow Acquisitions Non-cash At 31 December 2006 (Excluding Movement 2006 Cash) £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand: 837 1,013 - - 1,850 Bank loans & notes due within one year (1,500) (1,219) (881) - (3,600) Bank loans & notes due after one year (3,657) (12,443) - - (16,100) Finance leases due within one year (175) 687 (621) - (109) Deferred financing costs 160 268 - (118) 310 ------ ------- -------- -------- ------- (4,335) (11,694) (1,502) (118) (17,649) ====== ======= ======== ======== ======= The non-cash movement relates to the amortisation of the deferred financing costs. 7 RECONCILIATION OF NET CASH INFLOW TO MOVEMENT IN NET DEBT Year ended 31 Year ended 31 December 2006 December 2005 £'000 £'000 Increase/(decrease ) in cash in the year 1,013 (1,132) Cash inflow from financing (12,707) 3,843 ---------- ---------- Change in net debt resulting from cash flows (11,694) 2,711 Debt acquired with subsidiary undertaking (881) (7,588) Acquired finance leases (621) (378) Non-cash loan notes - (1,007) Other non cash changes (118) (42) Net (debt)/cash at 1 January (4,335) 1,969 ---------- ---------- Net debt at 31 December (17,649) (4,335) ========== ========== 8 SHARE CAPITAL 2006 2005 £'000 £'000 Authorised: 9,950,000,000 ordinary shares of 0.1p each 9,950 9,950 50,000,000 convertible A shares of 0.1p each 50 50 --------- --------- 10,000 10,000 ========= ========= Allotted, issued and fully paid: 452,512,406 (2005: 332,896,474) ordinary shares of 0.1p each 453 333 50,000,000 (2005: 50,000,000) convertible A shares of 0.1p each 50 50 --------- --------- 503 383 ========= ========= The issued share capital has been increased in 2006 as follows: Date Number of Issue price shares 1 January 2006 332,896,474 31 May 2006 9,772,795 11.00p 17 July 2006 100,000,000 12.00p 17 July 2006 7,843,137 12.75p 7 September 2006 2,000,000 15.00p ----------- Total shares issued in 2006 119,615,932 ----------- 31 December 2006 452,512,406 =========== 9 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS Group Group 2006 2005 £'000 £'000 Profit/(loss) for the financial year 394 101 Issue of shares during the financial year 14,375 25,795 Issue costs (654) (962) Share based payments reserve 1,017 85 Recovery of prior year flotation costs - 15 -------- -------- Net addition to shareholders' funds 15,132 25,034 Opening shareholders' funds 26,943 1,909 -------- -------- Closing shareholders' funds 42,075 26,943 ======== ======== END This information is provided by RNS The company news service from the London Stock Exchange

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